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February 24, 1994

STAC WINS $120m AWARD AGAINST MICROSOFT, BUT MUST PAY $13.6m

By CBR Staff Writer

Tiny Stac Electronics Co, Carlsbad, California – it lost $1m on sales up 50% at just $6.1m in its fiscal first quarter – is in for a cash windfall following a federal jury award of $120m in favour of Stac and against Microsoft Corp. The court ruled that Microsoft appropriated technology patented by Stac when it developed its DoubleSpace compression system in MS-DOS 6.0 and 6.2. Stac did not come out of the cross-litigation scot free: it will have to return $13.6m to Microsoft because the court also ruled that it had misappropriated a Microsoft trade secret in reverse engineering undocumented calls in MS-DOS to make its Stacker disk compression system easier to install. In many ways, this is the more significant ruling, and Stac intends to appeal the ruling, which could hit many other software companies that have used reverse engineering to ensure that their applications are compatible and work efficiently. Microsoft says it will seek to have the verdict against it overturned, and does not believe the ruling will affect products already shipped to stores, including personal computers with MS-DOS 6.0 or 6.2 pre-loaded onto them. It is withdrawing 6.2 and will ship an MS-DOS 6.21, which excludes DoubleSpace to stores and computer manufacturers within a few days. Microsoft also said it would ask the federal judge to block any further shipments of Stacker that make use of the misappropriated feature. Povision for the verdict will reduce fiscal third-quarter earnings by about 26 cents a share. FA juror said the jury decided the $120m by calculating royalties of $5.50 per copy.

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